8-K: Lendway Reports Q3 Loss Amid Seasonal Shifts, Higher Costs

Lendway, Inc. announced a significant increase in net loss and operating loss for the third quarter ended September 30, 2025, attributing the results to business seasonality and rising input costs.

Summary

• Net revenue for the three months ended September 30, 2025, was $5.2 million, a decrease from $6.6 million in the prior year period.
• The company reported a gross loss of $0.06 million, or (1.2)% of sales, compared to a gross profit of $1.4 million, or 21.7% of sales, in the same period last year.
• Operating loss widened to $3.0 million from $1.4 million in the three months ended September 30, 2024.
• Net loss from continuing operations increased to $3.4 million compared to a loss of $1.5 million in the prior year.
• Net loss attributable to Lendway was $2.9 million, or $1.61 per diluted share, a significant increase from a loss of $1.1 million, or $0.64 per diluted share, in the comparable period.
• EBITDA was a loss of $2.4 million, worsening from a loss of $0.6 million in the three months ended September 30, 2024.
• Cash used in operations increased to $9.9 million from $7.6 million in the prior year period.
• The decrease in revenue and gross profit was attributed to strategically growing tulips earlier for Mother's Day demand, resulting in fewer stems for sale in the quarter, fewer Dutch bulbs purchased in 2024, increased average bulb prices, and tariffs.
• As of September 30, 2025, cash and cash equivalents totaled $1.8 million, up from $0.9 million at June 30, 2025, primarily due to debt proceeds.
• Total debt increased to $45.5 million from $34.1 million at June 30, 2025, driven by drawing on a revolving line of credit and additional promissory notes to purchase tulip bulbs.

Sentiment

Score: 3

Explanation: The financial results show significant deterioration across all key profitability metrics, including a substantial increase in net loss and a shift from gross profit to gross loss. While management attributes this to seasonality and expresses confidence in future quarters, the current performance is poor and debt levels have risen considerably. The positive outlook is forward-looking and subject to risks.

Positives

• Cash and cash equivalents increased to $1.8 million as of September 30, 2025, from $0.9 million at June 30, 2025.
• Working capital significantly increased to $11.3 million at September 30, 2025, from $1.1 million at June 30, 2025, primarily due to purchasing bulbs for the upcoming high season.
• Management expresses confidence in future performance, stating the company is laying groundwork for a successful year ahead and is set up to capture the full potential of the peak season.

Negatives

• Net revenue decreased to $5.2 million from $6.6 million year-over-year.
• Gross profit turned into a gross loss of $0.06 million, or (1.2)% of sales, compared to a gross profit of $1.4 million, or 21.7% of sales, in the prior year.
• Operating loss widened to $3.0 million from $1.4 million in the three months ended September 30, 2024.
• Net loss from continuing operations increased to $3.4 million from $1.5 million year-over-year.
• Net loss attributable to Lendway significantly increased to $2.9 million, or $1.61 per diluted share, from $1.1 million, or $0.64 per diluted share.
• EBITDA loss worsened to $2.4 million from $0.6 million in the prior year period.
• Cash used in operations increased to $9.9 million from $7.6 million year-over-year.
• Total debt increased substantially to $45.5 million from $34.1 million in the previous quarter.
• Stockholders' equity decreased to $11.5 million from $14.8 million in the previous quarter.
• Increased foreign exchange losses contributed to the higher net loss from continuing operations.

Risks

• Ability to compete in the market.
• Concentration of revenue among a small number of customers.
• Dependency on Dutch tulip bulbs for operations.
• Changes in interest rates affecting debt costs.
• Ability to comply with the requirements and restrictions of the Credit Agreement.
• Economic and market conditions that may restrict or delay appropriate or desirable opportunities.
• Ability to develop and maintain necessary processes and controls relating to businesses.
• Reliance on one or a small number of key employees.
• Ability to generate enough cash or secure enough capital to execute business plans.
• Ability to obtain seasonal workers for operations.
• Other economic, international, business, market, financial, competitive, and/or regulatory factors affecting the Company's businesses generally.
• Exchange rate fluctuations impacting financial results.
• Tariffs on imported goods, specifically bulbs, reducing profitability.
• Availability of additional capital on desirable terms, if at all.

Future Outlook

Management expects revenue to increase in the remaining quarters of fiscal year 2026 due to more bulbs in inventory, subject to normal growing risks. Gross margin is also anticipated to improve in the remaining quarters as the company has more bulbs to grow into stems. The company believes its cash balance, cash generated by operations, and available borrowings will provide adequate liquidity and capital resources for at least the next twelve months, and sees potential for growth and other opportunities.

Management Comments

• Mark Jundt, Chairman and Co-Chief Executive Officer, commented: "This quarter reflects the natural seasonality of our business, but we're encouraged by the momentum we're building. The Company is laying the groundwork for a successful year ahead, and we feel as confident as ever in our future."
• Dan Philp, Co-Chief Executive Officer, added: "This quarter is an important quarter in terms of buying our bulbs and preparing our growing programs for the upcoming busy season. We believe that we have set ourselves up to capture the full potential of the peak season ahead."

Industry Context

Lendway operates in the specialty agriculture sector, specifically as a major producer of fresh-cut tulips through its Bloomia subsidiary. The results highlight the significant seasonality inherent in this business, with the third quarter being a period of lower sales as the company strategically shifts growing cycles to meet peak demand around events like Mother's Day. The industry is also subject to external factors such as rising input costs (bulb prices) and tariffs, which have impacted profitability and gross margins.

Related Party Transactions

• Total debt includes a $6.4 million note payable to a related party as of September 30, 2025.

Stakeholder Impact

• Shareholders face significant dilution of earnings and a decrease in stockholders' equity due to increased losses.
• Creditors are exposed to increased debt levels, with total debt rising to $45.5 million.
• Customers may experience higher prices as the company has raised prices to partially offset increased bulb costs and tariffs.
• Suppliers of Dutch tulip bulbs remain critical, highlighting dependency and exposure to price increases and tariffs.

Next Steps

• Grow more bulbs into stems to sell in the remaining quarters of fiscal year 2026 to increase revenue.
• Improve gross margin in the remaining quarters of fiscal year 2026 by leveraging increased bulb inventory.
• Continue laying the groundwork and preparing growing programs for the upcoming busy season to capture peak season potential.

Key Dates

Recommendation

The company reported significantly worse financial results, including a substantial increase in net loss and a shift to gross loss, primarily due to seasonality and rising input costs. However, management emphasizes that this quarter reflects strategic preparations for the upcoming peak season and expresses confidence in future revenue and gross margin improvements. The increase in debt to fund bulb purchases is a concern, but also an investment for future sales. A 'hold' recommendation allows investors to observe if the anticipated seasonal recovery and strategic initiatives materialize in the subsequent quarters, balancing the current poor performance with the forward-looking positive outlook.

Keywords

Lendway, LDWY, Q3 2025 earnings, financial results, net loss, operating loss, EBITDA, Bloomia, tulips, specialty agriculture, seasonality, debt, working capital, SEC filing